Citi (C) Announces Preferred For Common Exchange With Govenment and Other Holders; U.S. Stake to 36%

February 27, 2009 7:08 AM EST

Citi (NYSE: C) will issue common stock in exchange for preferred securities, which will substantially increase its tangible common equity without any additional U.S. government investment. The transaction is intended to build Citi's TCE to a level that removes uncertainty and restores investor confidence in the company.

Citi will offer to exchange common stock for up to $27.5 billion of its existing preferred securities and trust preferred securities at a conversion price of $3.25 a share. The U.S. government will match this exchange up to a maximum of $25 billion face value of its preferred stock at the same conversion price.

Citi Chief Executive Officer Vikram Pandit said, "This securities exchange has one goal - to increase our tangible common equity."

This transaction could increase the TCE of the company from the fourth quarter level of $29.7 billion to as much as $81 billion.

Based on the maximum eligible conversion, the U.S. government would own approximately 36 percent of Citi's outstanding common stock and existing shareholders would own approximately 26 percent of the outstanding shares.

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